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Thursday, 23 August 1984
Page: 284

Senator COLEMAN -On behalf of the Senate Standing Committee on Industry and Trade I present a report dated August 1984 on Australia-China trade, together with a transcript of evidence.

Ordered that the report be printed.

Senator COLEMAN —by leave-I move:

That the Senate take note of the report.

I have the honour to present to the Senate the report of the Senate Standing Committee on Industry and Trade entitled 'Australia-China Trade'. The Committee commenced its inquiry into the prospects of trade between Australian and China following a visit to this country of the Chinese Premier, Zhao Ziyang. Much has happened since that historic visit in April 1983. My Committee believes that China could become one of the most important markets for Australian goods and services by the year 2000. However, it is imperative for Australia to develop this market as much and as quickly as possible because many of our traditional markets have declined over the past 10 to 15 years and there appears to be very little prospect of Australia regaining its place in those markets.

Unlike most developing countries China has set about to achieve a steady and sustained rate of growth without becoming too dependent on other countries thus avoiding the only too familiar debt servicing problems. China also regards strong mutual agreement on foreign policy as a necessary basis from which to enter into a lasting trading relationship. However, the Committee was quick to realise that good foreign relations do not automatically mean a profitable trading relationship. China is just as tough a trade negotiator as any other country, if not tougher.

The biggest mistake for any person to make is to equate China's one billion population with a market that is hungry for foreign goods and services. On the contrary, China has produced and will continue to produce locally as many goods and services as possible and will consider the importation of only items deemed necessary for its continued economic development and modernisation. The report is at pains to stress that the successful entry into the China market will therefore depend not so much on a foreign firm's ability to engage in conventional importing and exporting, but rather on its ability to participate in the economic modernisation of China by way of joint ventures and co-operative trade.

The Committee believes that the rewards are there but the Australian business community will have to weigh up the advantages and disadvantages of doing business with the People's Republic of China. This will be done only after critically assessing China's past economic achievements and the conditions under which China is prepared to allow foreign participation in certain sectors of its economy. Further China's commercial and trading system differs markedly from that of many of our traditional trading partners. Therefore it is necessary for any would-be trader to understand fully the subtle and not so subtle differences in negotiating styles.

The Committee hopes that the compilation of this report will go a long way towards filling an information gap and thus prevent Australian firms from engaging in unproductive, frustrating and sometimes costly exercises which in the long run will only restrain rather than promote Australia's trading ties with China.

The report as such does not contain a long list of recommendations. On the contrary, the Committee has made very few because it believes that more time is required to assess the effectiveness of policies which have recently been put into place. The Committee is also of the opinion that many of Australia's current trade policies and initiatives have not been fully utilised due mainly to a lack of understanding in the Australian business community with respect to the China market.

Trade with China could double overnight as a result of an expansion of our existing trade with China. However, while new trade and investment prospects are possible, they are unlikely to have any impact in the short to medium term. It is therefore important to realise that no matter what new directions Australia's trade may take, our exports will continue to be dominated by raw materials such as wool, wheat, iron ore and other materials.

A feature of trade with China which is quite common with trade with any centrally planned economy is the emphasis on seeking bilateral balances. To date , Australia has enjoyed a very favourable balance of trade with China. While this may be satisfactory from Australia's point of view, we must nevertheless acknowledge the right of China to develop markets for goods and services within Australia. The Committee is of the opinion that neither Australia nor China should become too preoccupied with the present trade imbalance. It believes that it is more important for all countries to pursue multilateral trade balances which offer greater prospects for trade. More importantly, the composition of trade between Australia and China rules out any possibility of achieving short to medium term trade balances.

The vast majority of Australia's exports to China comprise much-needed raw materials. On the other hand, China, at its present stage of development, can offer only goods and services which are already available in Australia and/or are supplied by other countries. In other words, China's success in the Australian market place will depend on Australia's industry policy and her own ability to compete with other countries who are already exporting to Australia. It must also be pointed out that Australian firms will encounter similar obstacles in trying to export non-essential goods and services to China. We believe that in order to consolidate and expand Australia-China trade, we need to ensure that our industry and trade policies are clearly understood by China. Where there may be areas of misunderstanding, Australia should take immediate steps to clarify the situation so as to avoid unnecessary and prolonged misgivings about our preparedness to trade with China.

As with any country, trade is inhibited by a number of factors. But the Committee believes they are not sufficient reason for Australian businesses to wait until some of them are improved. As I have already mentioned, barriers to trade exist between all countries and it is therefore important that Australians acknowledge that they exist and plan accordingly.

If Australia does not introduce any new trade initiatives, Australia-China bilateral trade would probably continue at around $1 billion per annum. On the other hand, the Committee believes there is far greater potential to be realised from developing stronger trade and investment links with the People's Republic of China. In particular, I believe that this will be realised only if we pursue a more aggressive and flexible trade policy. In this regard, the Committee has acknowledged in its report that it is pleased to see that there are already signs that such a policy is underway in this market. In particular, the Committee compliments the Department of Trade on its China action plan which has adopted a more market-oriented and target-oriented approach to trade. While general trade initiatives and policies are required, the Committee believes that the development of specific country action plans will provide the necessary mechanism to establish and consolidate a lasting presence in that market.

One note of concern the Committee did express in the report is the relationship between trade and aid. In recent years that relationship has become blurred. This has led to a situation whereby recipient countries have come to expect an aid package to form part of a commercial venture. Unfortunately, Australia has gone the way of most donor countries and developed aid programs to assist or complement commercial ventures. The Committee is concerned with this trend and believes that strict guidelines should be laid down in order to prevent aid programs from distorting normal commercial decisions and marketing arrangements. The Committee believes that this concern has also been spelt out in the report of the Jackson Committee to Review the Australian Overseas Aid Program which was tabled in this chamber at the end of the last session.

The Committee believes that China will become one of the most important markets in our region even though at this stage the shape of this market is a little unclear. Australia, however, cannot afford to sit back and wait until the picture clarifies. I believe we must consolidate our position in this market now and be willing to modify that position as circumstances change. Australia is already regarded as an old and trusted friend and both the public and private sectors believe that China is very keen to do business with Australia. In order to translate that willingness into firm proposals, both the Government and the private sector will need to work with resolve and dedication in a spirit of co- operation and trust.

Finally, Mr Deputy President, and speaking on my own behalf, I want to express my concern that the Committee's report is not as comprehensive as it could have been, or even as it should be. I believe that it is time this Parliament took stock of the entire committee system. It is time we looked at a range of issues which affect the effectiveness of those committees. One of those issues, I believe, is whether we expect them to bring reports before this Parliament which are meaningful and of assistance to industry as well as government.

The area of most concern to me, and I believe to most of my Committee colleagues, was that during our hearings we were told many times of difficulties being experienced by Australian industries endeavouring to do business with China. Most of the obstacles appeared to be more obvious in China itself. I believe that it would have been of great benefit it us, and therefore industry and the Government, if we had been able to have at least a sub-committee visit the country.

In making that statement I am well aware that the media may well treat it in their usual manner of parliamentarians wanting 'junkets' overseas. That is why I make these statements on my own behalf and leave the other members of the Committee to concur or otherwise. A measure of the maturity of the media in this country would be a recognition that the parliamentary committee system has to work in the interest of Australia as a whole. If this means that some assistance could be provided to industry and governments by having a committee travel, then so be it.

I simply point out that this Parliament receives many visits each year from committees of other parliaments on fact-finding missions and to look at particular areas in Australia. We have not yet grown out of the habit of being more concerned with what the media might say than whether the activities of the committees will provide a much broader report to the Parliament and therefore greater assistance and benefit to the country as a whole. I hope that this Parliament will not delay much longer in making decisions which vitally affect the operations of committees.

Mr Deputy President, I am sure you would agree that the effectiveness of a committee depends largely on the competency and capacity of its secretariat. It is therefore appropriate that I take this opportunity to record the Committee's appreciation of the work done by our Committee staff. Firstly, let me make specific mention of Mrs Eleanor Gilmour, our stenographer-secretary. Whilst Eleanor's personal contact with the Committee has been minimal she is one of a number of backroom people who service Senate committees in a steno-secretarial capacity. I thank her for the many hours, days, even weeks spent ensuring that every 'i' was dotted and every 't' crossed through what must have seemed like millions of background papers, drafts and re-drafts until the report was in the form in which I am presenting it to the Parliament today.

Miss Sue Lowe joined our staff for a brief period at a time when nearly all of the public hearings had been concluded, but displayed her ability to appreciate quickly the direction of the inquiry and thus made a valuable contribution. She has now moved on to another area of the Department of the Senate. The Committee wishes her well in that position.

I thank Mr David Brailey for the assistance he gave while he was with the Committee. He has now moved to the House of Representatives and we hope the transition will not be too difficult for him. We wish him well for his future there. Mr Gavan Cattanach is the only other member of the staff, apart from the Secretary and Eleanor Gilmour, who remained with the Committee during the entire inquiry. He demonstrated his ability not only to make sure that everyone got the right papers but also to have the right people in the right place at the right time.

As I have said, this inquiry has not been an easy one insofar as we have had a number of changes with our staffing arrangements. However, it would have been an almost impossible one if we had not had the services of the Secretary, Mr Peter Keele. He displayed a tremendous ability to weather any situation that occurred and was genuinely concerned to ensure that every avenue was adequately explored. I am sure that when people read this report they will more fully appreciate the valuable contribution he has made. I am particularly concerned to record my appreciation for the assistance he has given me as Chairman. I commend the report to the Senate.

Question resolved in the affirmative.